Tax Reductions May Be Conservative Party’s Strategy to Revive Popularity Ahead of UK Election – Sky Bulletin

The battle for political dominance heats up in the UK as the Conservative Party, currently trailing in opinion polls, braces for the forthcoming general election. In a strategic move to regain voter confidence, Chancellor of the Exchequer Jeremy Hunt is anticipated to unveil a series of tax cuts in his upcoming budget announcement this Wednesday.

Despite signs that the British economy is slipping into a recession and with public coffers under pressure, Hunt faces a delicate balance. Announcing considerable tax cuts could necessitate a return to austere measures for public services that have already undergone extensive budget tightening.

Prior to his budget speech, the Treasury shared snippets indicating Hunt’s intention to highlight the resilience of the British economy amidst challenges like the COVID-19 pandemic and the subsequent energy cost surge caused by the conflict in Ukraine. Inflation rates incurred by these events have prompted the Bank of England to ramp up interest rates.

Hunt is expected to convey optimism, stating, “While we are contending with high interest rates in our battle against inflation, we can start to offer families permanent tax relief based on the economic headway we’ve made and our commitment to the Prime Minister’s fiscal goals.”

In a preceding meeting with King Charles III on Tuesday, Hunt likely discussed the proposed reduction of the national insurance tax by 2 points down to 8%, applicable to over 27 million workers. This potential cut would follow a similar reduction enforced last November.

To finance these cuts, the Chancellor may paradoxically introduce tax hikes in other areas, potentially targeting businesses, air travel, vaping products, and increasing the tax burden on oil and gas companies. Speculation is rife about whether he will also terminate the “non-domiciled” tax status, often used by wealthy individuals to limit their UK tax liabilities.

However, there is skepticism about whether any budgetary changes will significantly impact the Tories’ political standing. Despite past tax reductions, their favorability remains low, and polls predict a substantial defeat to the Labour Party.

Prime Minister Rishi Sunak, alongside Hunt, restored financial stability following the tumultuous tenure of Liz Truss, whose unfunded tax cuts induced market chaos and soaring borrowing costs. Nevertheless, with the country facing its most severe cost-of-living crisis in years, Sunak’s political fate hinges on improvements felt by households and the need to address monumental pandemic-incurred debts.

Adam Corlett from the Resolution Foundation expresses doubt about the prudence of tax cuts amid current economic pressures and looming public debt concerns.